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How to Choose a Prepaid Debit Card

The following question was recently submitted via Mint’s Facebook page:

Reader: What is the best type of FREE pre-paid card to get? I think I need to get a gas card because using the debit (card) is not working in our house — it’s too easy to just grab a soda, etc. I think it would be easier to manage our spending if we had a preset amount to spend each month, but I don’t want to pay any fees!

Why is this an excellent question? It’s an excellent question because the Facebook follower is exploring ways to control the household’s spending by investigating alternative payment options. This is the type of independent research that every consumer should perform when applying for, or buying, any sort of financial service product.

Before I answer her question:

In the spirit of full disclosure, I have written about and expressed concern over certain fees associated with some of the prepaid debit cards on the market. I have also suggested that prepaid debit cards aren’t necessarily an alternative to a responsibly managed checking account, nor are they a surefire way to build credit. That being said…..

Consumer-Friendly Prepaid Debit Cards

If you’re looking for the least expensive prepaid debit card option, then I believe the American Express prepaid debit card is an excellent choice. I’ve researched most, if not all, of the prepaid cards on the market and the American Express fees structure is the very consumer-friendly — the card has only one fee, an ATM fee of $2 (your first ATM use is free each month).

There’s also a fee that you’ll pay to load the small or “preset” money on their card but you’re not paying that to the card issuer — you’re paying that to a company like Western Union or MoneyGram.

Not a Solution for Impulsive Spending

Another thing to keep in mind when using any prepaid card, or any debit or credit card for that matter, is that you can still use it to buy gas, sodas, and anything else the gas station sells. So, neither a gas card or a prepaid debit card will solve the problem of impulse purchasing. That’s something you’ll have to control on your own, since it can’t be addressed systemically by choosing a certain card.

If you wind up deciding not to use prepaid debit card, a gasoline gift card might be a good alternative. They’re very common and can be purchased in various denominations — $5, $50, $100 and many other amounts. You can purchase them at the gas stations you use most often or even at drug stores. This options is fee free and it allows you to pay at the pump, in most cases.

Keep in mind that a gasoline gift card also does not solve the issue of impulse buying because, like prepaid debit cards, they can be used to buy anything the gas station sells. I know this personally because I used a Shell gift card I claimed as a reward from my Chase Sapphire credit card and used it to pay for getting a tire patched after I ran over a nail.

The Bottom Line

In the end, whether you use a prepaid debit card, a gas card, or a gift card, learning to control impulse spending has nothing to do with what kind of card you use — it’s about adopting responsible habits.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. The opinions expressed in his articles are his and not of Mint.com or Intuit. Follow John on Twitter.